Thousands of new products launch every month. Yet only a fraction of those get enough traction to be considered successful.

Of course, there are the exceptions — the breakout successes that we all hear about: Snapchat, Uber, and of course Pokémon Go.

Even though that’s not likely to be your product, you can still knock it out of the park. But how do you test market demand early to know if your idea is a winner?

Throughout my career I’ve helped launch a dozen successful software products including GoToMeeting, AppFolio, and ProductPlan. I have learned five powerful techniques that entrepreneurs use to learn whether their product will be successful — before they launch their product.

These methods won’t guarantee success, but will dramatically increase your odds. In my case, these techniques resulted in products that today now generate hundreds of millions of dollars in revenue yearly.

1. Before Anything Else, Find a Problem Worth Solving

find problem worth solving

Before spending a dime on development, I interview 10-20 potential customers to understand the problem I’m solving. This is before I tell them about the product features, pricing, or how it’s going to change their lives.

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“Before spending a dime on development, interview potential customers to understand the problem.”

I call these “problem discovery” interviews. They’re in-depth conversations, often conducted in person, and last between 30-60 minutes. They’re designed to not only thoroughly understand the problems, but to learn whether the problem is worth solving in the first place. A problem needs to be high enough on a customer’s priority list to be interested in your product.

For example, in the early interviews for GoToMeeting we learned that other online meeting products were hard to use, feature bloated, and difficult to budget. By thoroughly understanding these problems, we developed a product that was easier to use, with fewer features, with all-you-can-use pricing. Within a short time that product became a blockbuster success.

In early conversations with customers and investors, many entrepreneurs lead with the product description and features. I think this is a mistake – by not understanding the problem thoroughly, many products miss the mark. I think the single most important key to product success is asking the right questions about their problems.

Here are some questions you can use to understand whether the problem is important enough to solve:

  • “How are you solving that problem today?”
  • “What is most frustrating about your current solution?”
  • “Where is solving this problem on your priority list?”
  • “If you solve that problem, how much money will you save / make?”
  • “What does a successful year for you look like?”

2. It’s Not a Business Unless You Can Sell

it's not a business if you can't sell

So many entrepreneurs launch their product and then wonder why their sales are anemic. How do you know in advance whether customers will actually pay for your product?

In my experience, knowing how to sell the product in a repeatable way is more important than the product itself. In a sense you’re validating sales, not just validating a product.

For every successful product I’ve launched, I previously had test-sold the product to at least 20 customers. My belief is entrepreneurs do not need a fully functional product to learn whether customers will buy. In fact, my early test sales are often from a slide deck or rough prototype.

By test-selling, you can learn about the sales cycle, whether your target customer is the actual decision-maker, whether they have budget to buy, and further refine your pricing.

In these sales interviews, customers don’t necessarily pay you in advance, but you are one step closer to having paying customers on your first day of your product launch. For example, with my current company ProductPlan, we had several customers who were ready to give us their credit card number within hours of when our product was available for purchase.

If you don’t have sales skills or can’t handle rejection, get over it and pick up the phone.

3. Customer Acquisition Costs are the Key to Success

customer aquistion cost

You’ve seen it before: Awesome products that launch with a bang and then couldn’t achieve enough traction to make the numbers pencil out. Many entrepreneurs don’t thoroughly understand how they will acquire customers and then how much those customers will cost to acquire.

The rule of thumb is simple: A customer’s acquisition cost needs to be significantly less than their lifetime value. Yet so many entrepreneurs go in blind on these basic metrics when launching products. Fortunately there are easy and inexpensive experiments that you can use to test acquisition cost.

At ProductPlan, before we had written any line of code, we set up a landing page. This primitive website was designed to test whether anyone was searching for software like ours and to learn whether the messaging we had defined resonated with our target audience.

We then drove traffic to the landing page using Google Adwords and LinkedIn Ads. We targeted product managers with keywords that they might use to search for a solution like ours. Once they came to our landing page they were prompted to sign up for an early version of our product.

The experiment was a success because we learned so much about the acquisition cost – how much it cost to bring someone to our website, the clickthrough rate on advertising, what percentage of people signed up for more information, and more.

Through this process we could roughly estimate the conversion rates and acquisition costs for each step of the sales funnel.

Perhaps more importantly, these prospects provided their contact information. We then reached out to them to have deeper discussions about the problem, product features, and pricing.

It was a goldmine of information, and we spent less than $1,000 on this simple experiment.

4. Know This: Your Original Idea is Probably Wrong

original idea is wrong

For every product I’ve developed, the final product we launched was dramatically different from the original concept we began with. Through interviews and experiments, we were able to challenge our assumptions, discard bad ideas, uncover innovative features, and fine-tune our prices.

For example, when we were validating ProductPlan, we assumed our market would be limited to product managers at software companies. That turned out to be false. By speaking with dozens of product managers we discovered our market was much broader and included companies in media, healthcare, retail, and more. This helped us create a product and marketing that better suited a wider market.

Often entrepreneurs spend an inordinate amount of time on business plans and spreadsheets that are essentially a work of fiction. Or worse, they launch their product based on their original idea and then waste time and resources changing the product and pricing to better fit their market. That’s backwards.

Entrepreneurs can get closer to reality — and build a better product — by testing their assumptions before launching. But many misuse the “Lean Startup” method to throw spaghetti against a wall and then hope that people buy. And when people don’t buy (or buy in low numbers) the entrepreneur wastes valuable time.

It goes without saying that pivoting your product ideas during this early validation rather than after you’ve built the product is significantly cheaper.

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The way entrepreneurs can challenge their assumptions: write them down and then get out to test them to see if they resonate with potential customers experts (for example, analysts for the industry, people who have been employed by the industry, consultants, etc.). A healthy dose of skepticism goes a long way.

“Why?” is by far the most important question you can ask to challenge your assumptions. With it you can get closer to the truth from customers. Unfortunately this question isn’t used often enough — too many people ask a question, and then take the answer at face value. It’s a missed opportunity to understand motivation and validate what someone would really do. The Five Whys is a great technique for getting to the underlying reason — the real reason — behind a customer’s motivation.

5. Perfect is the Enemy of Good — Just Launch It

just launch it

I’m a believer that entrepreneurs should jump off the cliff. This means, especially for software products, that you should launch as early as possible.

Reid Hoffman, the founder of LinkedIn, famously said, “If you are not embarrassed by the first version of your product, you’ve launched too late.”

I’m not saying that you don’t have a great first-time customer experience. Often people don’t give you a second chance if your product simply doesn’t work. But if you are solving a problem that’s big enough, customers will forgive you if the experience isn’t perfect.

With software products in particular, it’s possible to launch quickly with a minimal feature set if the product provides enough value. If a handful of customers are willing to pay, it’s good enough and you can improve over time.

Launching early gives you no better way to determine if you are on the right track. So many entrepreneurs waste time by trying to think of every scenario, please every customer, and ensure every feature is included.

An entrepreneur I know was passionate about launching a new mobile app he was certain would be popular. He spent months perfecting it. He spent thousands of dollars on mobile developers, and eventually took out a second mortgage on his house to put the finishing touches on the app before launching. Once he finally launched, he was shocked he had so few downloads. It was a sad, expensive lesson.

Entrepreneurs need to spend more of their time at the front end – discovering the problems in the market and validating whether someone will buy the product – before they build and launch. If you do an effective job at this front end, the building and launching the product becomes so much easier. You’re also gaining evidence for potential investors.

There is no way to systematically know with certainty whether you’ll be successful. But by using these techniques and launching early you can improve your odds dramatically.

Post Comments

14 Comments

  • November 16, 2016 at 4:06 am

    This post deserved a comment & I am here to do that. Great post.

    • November 16, 2016 at 10:08 am

      Thanks Nikhil! Glad you enjoyed the article. 🙂

  • November 19, 2016 at 10:03 pm

    I found your article to be; informative, specific, and with valid directional advice,. I believe it’s an excellent
    piece to advise & direct budding entrepreneurs “before” they invest too much time & money) needlessly.
    Pre-planning is fine to a point – however, nothing beats “getting a perspective clients views & opinions”
    before a product launch. No ONE, can “predict” what everyone that “might use their product” would want!
    A “clerk” can take orders; over the phone, web-site, in-person, etc., however, a “professional sales-person”,
    takes the time to; the customers “needs & wants”, beforehand. Guarantees a happy customer AND Happy
    Customers “tell others” !

    • November 29, 2016 at 10:43 am

      Thanks for your comments Howard. We agree that pre-planning has a place, but first-hand customer input is essential!

  • November 20, 2016 at 11:50 am

    Excellent article.
    If companies only took one or two of your suggestions they would be way ahead. Unfortunately many miss the most basic…start with a real problem, not just some solution to something that some manger thinks is a problem.

    • November 29, 2016 at 10:44 am

      Thanks Gary! Yes, often it’s someone’s *opinion* that drives decisions rather than facts. Unfortunate for many products.

  • November 22, 2016 at 7:52 am

    The thing I struggle is what happens when you’re looking to solve a problem in a new way. Take GoToMeeting for example: The problem wasn’t “how do I conduct a video conference online”, it was “how do I conduct a video conference online easier & cheaper”. Therefore isn’t the product’s features and execution, not the idea, that ultimately makes it a winner?

    Sticking with the GoToMeeting example, in order for that to be a winner, it would have to be highly functional at launch right? Since other products exist? Presumably you couldn’t be embarrassed by the first version because other substitutes existed and they were “ok”.

    • November 29, 2016 at 10:48 am

      Thanks for the comments Adam. In the case of GoToMeeting it was the lack of features and the innovative pricing model that made it a winner. A product like GoToMeeting launched into an existing market of 70+ competitors – so yes, it needed to be functional out of the gate. Basic features needed to be there and work flawlessly. But the minimum features we launched were enough to satisfy (and delight) a large part of the market. In a sense, the lack of features was a part of the value proposition. And the pricing, in a sense, was a feature because it provided a new way of consuming the product (all you can use). So even though it wound up being “cheaper” than much of the competition, it was really the model that won them over.

  • November 23, 2016 at 4:57 am

    Great article. It’s fundamentals like this we as product managers/entrepreneurs often overlook along the way. Too easy to get caught in the weeds missing the big picture, especially for established products.

    • November 29, 2016 at 10:49 am

      Thanks for your comment Chris!

  • December 3, 2016 at 12:28 am

    Excellent article, thank you. So much of this chimed with me. In my experience it’s easy to find yourself subsumed in the detail of the features and how to build the product, and less time on discovering the problems in the market as you put it. This has led to some nasty surprises. To succeed, you need a strong organisational culture of curiosity and open-mindedness, and a readiness to be proven wrong! It’s all too easy to become a megalomaniac when you think you have a great idea. Thanks again – great read.

    • December 5, 2016 at 5:05 pm

      Thanks for your nice comments Rachel. I like what you said about curiosity and open mindedness!

  • February 25, 2017 at 11:27 am

    As a marketing strategist who’s launched dozens of products, these 5 lessons resonated so much with me. It’s very challenging to be clear thinking and disciplined about the customer development and product/market fit process while running a startup or starting up a new product for an existing business. These 5 tips give you a great guide to thinking clearly and execute effectively.

    • February 27, 2017 at 9:52 am

      Thanks for your nice comment Matthew!
      Jim

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